New York Gives Tax Breaks To Parents and Shoppers

By JENNIFER MEDINA

Published: April 30, 2006

Most parents of school-age children will get money. People shopping for clothes will see their dollars go further at the mall. And married couples will get just a bit more money -- enough to see a movie -- the next time they file their taxes.

While a standoff held up one of the Legislature's main tax cut proposals, a plan to send property tax rebate checks to homeowners, the $112.1 billion state budget that emerged last week after a series of vetoes and overrides contains a number or tax breaks for a variety of New Yorkers.

Parents of school-age children emerge as the biggest beneficiaries of the changes. Many parents will receive up to $330 for each child between the ages of 4 and 17.

The tax credit is largely aimed at the middle class, with married parents who make $25,000 to $110,000 receiving the full credit. Single parents who make $25,000 to $75,000 are also eligible for the full credit, which will be deducted on their tax returns.

The tax credit begins to phase out at $110,000 for married parents and at $75,000 for single parents. The child tax credit will cost the state roughly $600 million annually, according to the Legislature and the governor's budget division.

The Legislature also agreed to eliminate the state sales tax on clothing and shoe purchases of less than $110, which will cost the state $600 million each year, according to the budget division.

The change means plenty of tax-free shopping in New York City, where the city repealed its sales tax as well. But because local municipalities, such as city and county governments, can impose their own taxes, shoppers in Nassau, Suffolk and Westchester Counties will still pay the local sales tax, typically around 4.5 percent.

The Legislature also eliminated part of the so-called marriage penalty. Under the previous tax policy, single taxpayers could claim a standard deduction of $7,500, while married couples filing separate returns could claim only $6,500 and those filing jointly could deduct only $14,600. Those amounts for married couples will increase to $7,500 and $15,000 to match the deduction for single taxpayers.

The real impact of the change, however, is modest, with an average savings of $27, according to the state budget division. Couples who make $150,000 to $10 million will receive the maximum benefit, $30. Over all, the change will cost the state about $50 million over the next two years, according to the budget division.

''Really the only people that will notice a difference are the parents with children,'' said Edmund J. McMahon, the director of the Empire Center, a conservative fiscal policy research group. ''For married couples, the change amounts to a cheap dinner -- a dinner at a diner.''

The Legislature's most ambitious tax cut proposal, which would have sent direct property tax rebate checks and cost the state about $4.1 billion over the next two years, was vetoed by Gov. George E. Pataki, who called the plan unconstitutional.